Market review

• Ahead of the key US jobs data and the G-20 summit in Hangzhou, China last weekend, most Asian markets ended mixed, as investors were closely monitoring the US jobs data for clues on Fed rates hike outlook path.

• Tracking regional markets, KLCI was traded within a tight rangebound band within 6.5 pts between an intra-day high of 1675.4 and a low of 1668.9 before inching up 1.2 pts after falling 11 pts in two straight sessions. WoW, KLCI lost 11.3 pts or 0.67% to 1671.8 amid lack of catalysts as investors remained sidelines following the recent lackluster Aug reporting season and pending the US Aug jobs data.

• On the back of a sluggish Aug ISM manufacturing index and lower-than-expected US jobs data, the Dow jumped as much as 125 pts intraday as investors viewed that the Fed may defer raising rate as soon as this month. However, the gains were reduced to 72 pts to 18492 (+0.5% wow) as the odds for a rate hike this month briefly dipped as low as 20% before climbing back to levels held before the data near 32%. Meanwhile, the dollar index was relatively unchanged as the prospect of a December rate increase to 60%.

Potential technical rebound

• Following a 2-day 11.1 pts selloff, KLCI staged a 1.2 pts technical rebound last Friday but still trading below the key uptrend line support, signaling further consolidation ahead unless the index can swiftly reclaim above the support trendline again.

• Key supports now are situated near 1665 (200-d SMA), 1656 (38.2% FR) and 1650 while resistance levels are 1675 (support-turned-resistance), 1684 (61.8% FR) and 1700.

Market Strategy

• Given a rebound in Brent oil prices and Dow last Friday as bets of a 2nd Fed rate hike in Sep was pushed off slightly, KLCI may experience another technical rebound today.

• Stock on radar. We recommend AJIYA (Trading Buy) as we see limited severe downside risks amid deeply oversold positions and supported by its netcash per share of 18 sen. Key upside targets are RM0.815-0.90 while supports fall on RM0.74-0.76. Cut loss at RM0.72

Source: Hong Leong Investment Bank Research - 5 Sep 2016